Research Note: Further evidence on choices of dominated mortgage products

FCA Occasional Paper No. 33 found that there was a surprising prevalence of 'dominated' choices in the UK mortgage market. Almost 30% of customers chose mortgage products that were strictly worse on all price dimensions than another available alternative which had comparable features and for which they satisfied the eligibility criteria. This situation is known as 'dominated' choices.

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This research note explores 2 further dimensions of these dominated choices.

The first is the supply of dominated products and the alternatives that dominate them:

  • whether they are concentrated within a small range of lenders
  • whether the superior products are only offered by niche lenders or in small supply
  • whether it is common for lenders to be persistently dominated for all consumers that choose their mortgage products

The second is whether dominated choices could be explained by preferences for non-product characteristics of the chosen lender, such as branch proximity or service quality rankings.